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SEC Enforcement Actions

					
The  Securities and Exchange Commission (SEC) is the United States agency with primary responsibility for enforcing federal securities laws. Whistleblowers with knowledge of violations of the federal securities laws can submit a claim to the SEC under the SEC Whistleblower Reward Program, and may be eligible to receive  monetary rewards and protection against retaliation by employers.


Below are summaries of recent SEC settlements or successful prosecutions. If you believe you have information about fraud which could give  rise to an SEC enforcement action and claim under the SEC Whistleblower Reward Program, please contact us to speak with one of our experienced whistleblower attorneys.

				

			

			
						
					
			

	
		
		

			

				
				
September 10, 2015

				 The SEC charged New York Global Group (NYGG) and its CEO, Benjamin Wey, with secretly obtaining control and manipulating the stock of Chinese companies they were purportedly guiding through the process of raising capital and becoming publicly-traded in the United States.  The SEC alleges that Wey and NYGG structured reverse mergers between clients and publicly-traded shell companies to secretly obtain ownership interests in the newly listed companies, which they concealed through a vast network of foreign accounts.  The SEC alleges they generated tens of millions of dollars in illegal profits as they sold the securities into artificially inflated markets.  In addition to Wey and NYGG, Wey’s wife and sister, their Switzerland-based broker, and two attorneys have been charged as well.  SEC				 					 

						
Tagged in:
													  Market Manipulation and Trading Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
September 9, 2015

				 The SEC charged national audit firm BDO USA and five of its partners with dismissing red flags and issuing false and misleading unqualified audit opinions about the financial statements of staffing services company General Employment Enterprises, after failing to obtain reasonable and coherent explanations about why $2.3 million (approximately half of the company’s assets) had gone missing.  In a related action, the SEC filed fraud charges against Stephen Pence, then General Employment Enterprises’ chairman of the board and majority shareholder, and a former U.S. Attorney and lieutenant government of Kentucky.  BDO agreed to admit wrongdoing and pay disgorgement and penalties of $2.1 million.  BDO’s five partners also settled the charges brought against them and agreed to pay $75,000 in penalties collectively.  The SEC’s litigation with Stephen Pence continues.  SEC				 					 

						
Tagged in:
													  Accounting Fraud, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
September 8, 2015

				 The SEC charged former CEO and CFO of now-bankrupt video management company KIT Digital with falsifying financial statements to make the company appear more profitable than it was.  The defendants’ variety of schemes, as alleged by the SEC, included an off-the-books slush fund used to generate payments back to KIT to create the false appearance that the company was being paid for its products.  The U.S. Attorney’s Office for the Southern District of New York brought parallel criminal charges against both men.  SEC				 					 

						
Tagged in:
													  Accounting Fraud, 
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
September 8, 2015

				 Financial publishing company Bankrate Inc. agreed to pay a $15 million penalty to settle accounting fraud charges.  The SEC alleged that Bankrate’s then-CFO, Director of Accounting, and Vice President of Finance, engaged in a scheme to fabricate revenues and avoid booking certain expenses to meet analyst expectations for its adjusted earnings before interest, taxes, depreciation, and amortization, a key financial metric known as “EBITDA.”  The SEC charged the three former executives as well.  SEC				 					 

						
Tagged in:
													  Accounting Fraud, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
September 8, 2015

				 Sports supplement and nutrition company MusclePharm agreed to pay a $700,000 penalty for committing a series of accounting and disclosure violations, including the omission or understatement of nearly $500,000 worth of perks bestowed upon company executives.  Three current or former executives and the company’s former audit committee chair also agreed to pay penalties of $210,000 collectively to settle related charges brought against them.  SEC				 					 

						
Tagged in:
													  Accounting Fraud, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
September 2, 2015

				 Investment advisory firm Taberna Capital Management will pay $21 million to settle charges that it fraudulently retained fees belonging to collateralized debt obligation (CDO) clients.  An SEC investigation found that Taberna did not inform CDO clients that it was retaining payments known as “exchange fees” obtained in connection with restructuring transactions.  Retention of the exchange fees was not permitted by the CDO’s governing documents or disclosed to investors in the CDOs. SEC				 					 

						
Tagged in:
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
August 25, 2015

				 The SEC obtained court authorization to freeze the assets of Mr. Lobsang Fargey, a Bellevue, Washington man accused of defrauding Chinese investors seeking U.S. residency through the EB-5 program.  The SEC alleged that Dargey and his “Path America” companies raised at least $125 million for two Washington-based real estate projects, but Dargey diverted $14 million for unrelated real estate projects and $3 million for personal use.  The court’s order also restrains Dargey from soliciting additional investors and requires him to repatriate funds transferred to overseas bank accounts.  SEC				 					 

						
Tagged in:
													  Regulatory Violations, 
													  Securities Fraud, 
													  Visa Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
August 19, 2015

				 Citigroup Global Markets will pay a $15 million penalty to settle SEC charges that it failed to enforce policies to prevent transactions that involved misuse of material, nonpublic information.  Broker-dealer employees routinely have access to material nonpublic information.  Therefore, federal securities laws require firms to take reasonable steps to prevent misuse of such information.  An SEC investigation found that between 2002 and 2012, Citigroup’s monitoring for such abuse was inadequate because it failed to review thousands of trades executed by its trading desks.  Additionally, the SEC found that Citigroup inadvertently routed more than 467,000 transactions on behalf of advisory clients to an affiliated market maker which executed the transactions as principal at or near prevailing market prices.  SEC				 					 

						
Tagged in:
													  Financial Institution Fraud, 
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
August 18, 2015

				 BNY Mellon will pay $14.8 million to settle charges that it violated the Foreign Corrupt Practices Act (FCPA) by providing valuable student internships to family members of foreign government officials affiliated with a Middle Eastern sovereign wealth fund.  An SEC investigation found that students related to foreign officials were given preferential treatment in that they were not required to meet the normally rigorous criteria of BNY Mellon’s highly competitive internship programs.  This was done to win or retain contracts to manage and service the assets of the sovereign wealth fund the foreign officials were affiliated with.  BNY’s $14.8 million payment includes $8.3 million in disgorgement and a $5 million penalty.  SEC				 					 

						
Tagged in:
													  FCPA, 
													  Financial Institution Fraud, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
August 17, 2015

				 Citigroup affiliates, Citigroup Global Markets, Inc. (CGMI) and Citigroup Alternative Investments LLC (CAI), will pay $180 million to settle charges that they defrauded investors in two hedge funds by claiming that the funds were safe, low-risk, and suitable for traditional bond investors.  An SEC investigation found that even as the funds began to collapse, CGMI and CAI failed to disclose the dire condition of the funds.  Many of the misleading representations were at odds with disclosures in written materials provided to investors.  The funds raised nearly $3 billion from approximately 4,000 investors before collapsing.  CGMI and CAI will bear all costs of distributing the $180 million in settlement funds to harmed investors.  SEC				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			


											

						

								

									
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